Canada’s November budget would require federally regulated banks and financial institutions to issue stablecoins through distinct subsidiaries, placing those entities under the Stablecoin Act alongside nonbank issuers.
These subsidiaries would be classified as non-financial institutions subject to the Act. The 2026 budget also seeks to extend the framework to foreign financial institutions lacking prudential oversight in Canada, aiming for uniform treatment across all issuers.
Stablecoins issued by bank-owned firms would remain within a regulatory framework that clearly separates covered tokens from publicly insured deposits.
The accompanying legislative annex proposes amendments to the Bank Act, Trust and Loan Companies Act, and Insurance Companies Act to bar federally regulated financial institutions from issuing stablecoins directly.
Under the current Stablecoin Act, financial-institution issuers are excluded, subject to regulatory provisions. Channeling issuance through a non-financial subsidiary would bring that entity within the stablecoin framework.
Bank ownership would not turn a covered stablecoin into a publicly insured deposit.
Budget intentions require legislation. Justice Canada’s consolidation current to October 19 marks operating provisions not in force. Regulatory terms and discretionary exemptions matter; the diagram is not a finding about any named issuer.
Under the Act, the Bank of Canada would register non-financial institution issuers, supervise compliance, monitor issuance and redemption risks, and take enforcement action.
The proposed extension for foreign institutions would target those outside Canadian prudential supervision. The annex further proposes clarifying that stablecoin issuance does not constitute deposit-taking for foreign banks and affiliates covered under Part XII of the Bank Act.
The existing Act also excludes central banks and permits the Bank of Canada Governor to grant conditional exemptions where provincial or foreign regulations are substantially similar.
What Holders Can Expect
Once the provisions take effect, the Act’s safeguards would mandate redemption at face value in the currency the stablecoin tracks.
Issuers would also need to hold reserves equal to at least the outstanding face value, along with qualified custody that segregates reserve assets and shields them from creditor claims by the issuer or custodian, except for holders’ redemption claims. These obligations remain subject to the Act’s statutory and regulatory terms.
Sections 33 and 34 would bar covered stablecoins from being classified as deposits, publicly insured instruments, or government-guaranteed or backstopped instruments, and would prohibit any representations suggesting otherwise.
A bank parent’s involvement would not transform the token into an insured savings balance.
The budget also commits to ongoing engagement on stronger consumer protections in the event an issuer or custodian becomes insolvent.
The Act received royal assent on March 26, though its operating provisions will take effect on dates fixed by order of the Governor in Council.
An impact statement for proposed regulations published on October 24 identifies fall 2027 as the intended commencement window for the broader framework.
The budget’s key development concerns eligibility to issue within the framework, while implementation remains contingent on legislation and commencement.
